SD companies find time is right to get into export business

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Now is a good time for San Diego companies to take advantage of exporting opportunities, according to a panel of international business experts hosted by The Daily Transcript and sponsored by the city of Murrieta.

Although Europe's economy is in a state of uncertain flux, Germany continues to thrive. Meanwhile, China has an emerging middle class that is increasingly interested in American-made luxury products.

The economies of India, Brazil, and even smaller countries like Turkey and Mongolia, also are experiencing growth.

"Globalization continues to accelerate," said Hugh Constant, president/CEO of the San Diego World Trade Center.

The panelists cautioned that each country is unique, and companies need to tailor their product to fit the individual market and culture.

"It's about going to these places and learning what they need because we shouldn't shove what we've got (on them)," said Roy Paulson, president of Paulson Manufacturing. "You can't push a string, and exports are like a string. You have to get that pull from the other side, and if you get that pull from the other side, it all works easily."

Robert Westfall, who is the president of Solatube, said his company determined it would be cheaper to manufacture its product in the United States and then ship it overseas, but the product wasn't selling.

"These countries that are developing, they don't want to buy things that are manufactured in the U.S.," Westfall said. “There's automatically an assumption that if it's manufactured in the U.S., they're overpaying for it, which is not the case. But that assumption cannot change. They look at us and are like, 'You guys drive fancy cars and live in big houses. I'm paying for that. We have poor people who can make the products here.’”

Some governments also have policies that favor local manufacturers, which makes it more difficult for American companies to compete. And while it may not be public policy in China to help Chinese companies, it is public practice, according to Westfall.

But there is a growing segment in China — the middle class — that enjoys high-end consumer goods produced in the United States. Some are even willing to travel to the United States just to purchase those items.

"Made in the U.S. is becoming more and more popular for that segment that has the money to spend," said Chuck Saathoff, owner and president of WorldTrans Services. "That's where exporting to China becomes a really big opportunity for companies."

Despite resistance in some parts of the world, Paulson said the "Made in the USA" tag is still the best brand name around, and it's something American companies need to take advantage of.

"Only companies here get to use that," he said. "We have that as a gift of the country, and this brand will run forever. It only continues to develop and be more and more important. And by utilizing that brand, we can all immediately have a branded product when we're selling overseas. We are not generic.

"So I really feel that U.S. companies (should) utilize the brand and strongly market 'Made in the USA' in foreign countries, but yet understand what the foreign country wants."

Another factor helping the U.S. export business is that it is no longer cheaper to manufacture goods in China, according to Keith Krzewski, partner and chief operating officer of Swenson Advisors.

Increasing labor rates for Chinese workers, who are now receiving benefits and vacation time, have driven up manufacturing costs. It's causing companies to relocate their plants to Mexico, the United States and other jurisdictions.

“All of a sudden that advantage they've had for a number of years is starting to change," Krzewski said. "(Manufacturing) is shifting on a global basis. We've got an opportunity here as a country, hopefully, to bring some of that back into the U.S."

However, government regulation is one of the biggest barriers for U.S. companies wanting to engage in international trade. The United States has 19 free trade agreements, but still trails many European countries in that regard, according to Constant of the World Trade Center.

Officials are currently working on a Trans Pacific Partnership Agreement to widen the number of trading partners.

A lot of small companies in San Diego especially feel the government is hurting more than it is helping.

"They feel the government is overly constraining some export," Constant said. "It's being sold by the French and Germans and Swedes, so all that happens is they don't buy American. They buy it from someone else."

Additionally, in order to compete with the rest of the world, America needs to focus on teaching the STEM (science, technology, engineering and mathematics) courses while also relaxing its immigration laws, Constant said.

"We have Ph.D. students from India that aren't allowed to stay," he said. "I think we should be encouraging the best and the brightest out of our universities to stay and work (here)."

Constant said San Diego's innovation economy gives it a competitive advantage, but the area needs the advanced manufacturing that goes with it.

"A lot of intellectual property we can actually export," he said.

There are approximately 3,000 companies in the area that are actively engaged in importing and exporting.

"We have a lot of students very interested in international careers," said Denise Dimon, director of the University of San Diego's Ahlers Center for International Business. "Where are the international careers in San Diego? One of the challenges we have is that we may have 3,000 international firms, but they're smaller and scattered. We don't have too many big headquarters."

Dimon said it's important to reach out to them and find out what their needs are.

The Brookings Institute recently announced it is working with the World Trade Center, the San Diego County Economic Development Corp., Connect, the Port of San Diego and Lindbergh Field to develop an export plan for the region.

Roundtable Participants

Anthony Capone, President, Nimbus Water Systems

Hugh Constant, Interim President/CEO, World Trade Center San Diego

Kimberly Davidson, Business Development Manager, City of Murrieta (sponsor)

Denise Dimon, Director, Ahlers Center for International Business, University of San Diego